Great Lakes in 'Hail-Mary' negotiations with newest lender

[z987k]

Ever have the conversation "What do we need to do to get a 121/135 operations certificate?" It's better to buy than create. Heck, the market cap is only $6M.

I believe that the combination of an improving economy and a federal government that's absolutely log-jammed makes existing certificates highly prized.

My view: you'll see Great Lakes Airlines d/b/a New Name Air. The stock holders will be wiped out, debt will be restructured, and old management will be shown the door.

Nah, they're issuing certificates. You're looking at a couple months for a basic 135 if you're good at paperwork. Or pay an lawyer to do it for you for no where near even 50k.
I mean there's a few for sale up here right now for only 35k.

 

[Autothrust Blue]

Wait. You mean I could have left my regional 7 years ago? Why didn't anyone tell me this?

You just haven't worked hard enough.

LUCK IS WHAT HAPPENS WHEN PREPARATION MEETS OPPORTUNITY (okay I can't keep a straight face.)

 

[FloridaLarry]

Worth a few mil? How? Why? Only if the EAS routes come along with it. Public interest in GLA is at an ever increasing low. The only thing bringing in revenue is money from the EAS routes. They have closes domiciles and gates everywhere not served by an EAS route to my knowledge. They are going to die unless they completely restructure, and that includes getting rid of this POS 1900s.

Whatever the certs are worth, they exist today, and could be obtained without Federal bureaucratic hoops.

Au contraire, GLA isn't only EAS. 65% of the revenue in 2nd Qtr is from EAS, up from 46% a year ago. They serve 24 airports, 16 of which are EAS. The others are ones ineligible for EAS but where GLA has a successful history of service (ie: can make a buck).

But it isn't only the certs. Changing to a different aircraft isn't just parking the Beeches in a cornfield. You have to have the infrastructure to support the new birds - parts, trained A&Ps, operations manuals, type-rated pilots, and more. Yes, it's easier than starting from a blank sheet of paper, but not much.

My money is on Great Lakes lives.
I predict Chapter 11, a debt forgiveness for equity deal, and GLA going private.

History says you're right. But any new lender will look at that history, and analyze both why it happened, and project what they can make out of New Name Air, Inc. Either if it's a success, or what they can pick from the carcass lying in a flaming wreck at the end of the runway.

They might have made it with the 9 Pax model if the FAA hadn't delayed & delayed its approval, and the price of AvGas cooperated better.

If you want to consider this as an omen, I just saw an up-dated B-1900 add-on for Flight Simulator. They used to include a GLA paint scheme. Now they don't.

 

[gotWXdagain]

Here's why Great Lakes continues to be propped up:

http://fortune.com/2014/04/10/collateralized-loan-obligations-our-next-financial-nightmare/

 

[FloridaLarry]

Here's why Great Lakes continues to be propped up:

http://fortune.com/2014/04/10/collateralized-loan-obligations-our-next-financial-nightmare/

Almost. Pretty much true in principle, but the article talks mostly about bank obligations & regulatory changes in the aftermath of the banking crisis.. GLA's lender is an investment company, not a bank. They have one lender, not multiple. They have two loans from them: For the larger one, collateral is the fleet of Beech 1900-D and Embraer Brazilias. The second one is a revolving line of credit for operating funds, also collateralized by the same aircraft. There are contractual links between the loans, requiring GLA to maintain certain financial ratios & reserves. At the moment, they can't.

 

[gotWXdagain]

Almost. Pretty much true in principle, but the article talks mostly about bank obligations & regulatory changes in the aftermath of the banking crisis.. GLA's lender is an investment company, not a bank. They have one lender, not multiple. They have two loans from them: For the larger one, collateral is the fleet of Beech 1900-D and Embraer Brazilias. The second one is a revolving line of credit for operating funds, also collateralized by the same aircraft. There are contractual links between the loans, requiring GLA to maintain certain financial ratios & reserves. At the moment, they can't.

This is all true. But, how do you think GLA's lenders are mitigating the risk of lending to Great Lakes? It can't just be by collateralizing the aircraft fleet, the fleet can't be worth that much.

 

[hook_dupin]

This is all true. But, how do you think GLA's lenders are mitigating the risk of lending to Great Lakes? It can't just be by collateralizing the aircraft fleet, the fleet can't be worth that much.

I spit-ball the fleet to be worth $30M (aircraft book value is on the balance sheet, and I shaved some off of that). GLA currently has $26.5M in debt. It's workable, but not for much longer. GLA is out of cash and continually gets loans for operations, while the value of the assets is declining at about $1.5M/qtr.

 

[surreal1221]

So ridiculous.

Just die.

 

[mshunter]

So ridiculous.

Just die.

For reals! Aren't they still at 9 seats, in a 1900? Isn't that 10 less seats than what unprofitable was for them?

 

[alaskadrifter]

For reals! Aren't they still at 9 seats, in a 1900? Isn't that 10 less seats than what unprofitable was for them?

Hageland runs 9 seat 1900s, but we also haul a LOT of bypass mail (in a combi configuration).

 

[vheissu]

I've noticed a Pilatus or two parked over at their terminal in Denver a few times recently. Anyone know what that's about?

 

[ppragman]

I've noticed a Pilatus or two parked over at their terminal in Denver a few times recently. Anyone know what that's about?

Boutique Air has a crew there doing EAS.

 

[derg]

I've noticed a Pilatus or two parked over at their terminal in Denver a few times recently. Anyone know what that's about?

I think they fly EAS out of PHX too.

 

[gotWXdagain]

I think they fly EAS out of PHX too.

And DFW.

 

[gotWXdagain]

I take it back. I'm revising my prediction. With the uncertainty over China and the possible Fed rate hike, the stock markets are crashing all over the world. Nobody is going to want to buy securities backed by junk debt, so fewer of those debts will be issued in the first place. ipso facto, GLUX doesn't get their loan, they're liquidated by November.

 

[FloridaLarry]

GLA has been going to the lenders who make risky-as-hell loans, not the equity markets (junk stocks & junk bonds). These folks make money by charging interest rates that make the mafia look generous. But to pay them, you have to have positive cash flow. GLA was buying time that way until a year or so ago.

Their 9-seat plan was an expense-reduction way to buy time and fill the cockpits. Its only hope is for pilot hiring elsewhere to stop, as well as extra 50-seat aircraft resuming being too expensive to operate at EAS rates, which has been skimming off some top EAS destinations.

The other part of the lenders' business plan is to have losses to offset their success stories. For when they sell, or collapse (Ch 7 or 11 bankruptcy) a company. No one can simply continue to lose money forever.

With their fleet value going below 'Descend and maintain...' and operating losses continuing, it's just a matter of time.

 

[dhood84]

Whatever the certs are worth, they exist today, and could be obtained without Federal bureaucratic hoops.

Au contraire, GLA isn't only EAS. 65% of the revenue in 2nd Qtr is from EAS, up from 46% a year ago. They serve 24 airports, 16 of which are EAS. The others are ones ineligible for EAS but where GLA has a successful history of service (ie: can make a buck).

But it isn't only the certs. Changing to a different aircraft isn't just parking the Beeches in a cornfield. You have to have the infrastructure to support the new birds - parts, trained A&Ps, operations manuals, type-rated pilots, and more. Yes, it's easier than starting from a blank sheet of paper, but not much.



History says you're right. But any new lender will look at that history, and analyze both why it happened, and project what they can make out of New Name Air, Inc. Either if it's a success, or what they can pick from the carcass lying in a flaming wreck at the end of the runway.

They might have made it with the 9 Pax model if the FAA hadn't delayed & delayed its approval, and the price of AvGas cooperated better.

If you want to consider this as an omen, I just saw an up-dated B-1900 add-on for Flight Simulator. They used to include a GLA paint scheme. Now they don't.

I still have the PMDG with the GLA livery lol......it's not an option anymore?!

Derek

 

[gotWXdagain]

GLA has been going to the lenders who make risky-as-hell loans, not the equity markets (junk stocks & junk bonds). These folks make money by charging interest rates that make the mafia look generous.

Correct. Great Lakes doesn't go about issuing stocks or bonds, but to mitigate the risk of the loan, the lenders will package them up into securities. As long as people keep buying those securities, lenders will continue to issue the loans. But with the stock markets correcting as they have been the last week plus, nobody is going to want to buy those riskier securities. GLA is liquidated by November.

 

[Skåning]

I still have the PMDG with the GLA livery lol......it's not an option anymore?!

Derek

Nerd alert!

 

[dhood84]

Nerd alert!

Most definitely!

Derek